In 2008, the Bitcoin paper unleashed a new idea on the world which, in hindsight, looks stupendously obvious, and in retrospect it seems surprising that nobody thought of it earlier. But more than the core concept behind a blockchain or a crypto asset, there is a fundamentally different underlying philosophy of the meaning of property being contemplated by decentralization.

 

Medieval Property

Even today, property is largely based on the same fundamnetal principles as it was in the Dark Ages. This is particularly evident in terms of ownership of land, but is also true for other forms of property (except intellectual property).

In the medieval conception of property, all property is fundamentally derived from a grant from the ruler. The king (or queen) is assumed to have ultimate ownership of everything, and all other property ownership is ultimately derived from a descendible transfer from the ruler to someone else, which may then be inherited or transferred to someone else.

The most philosophically significant point about this sort of “deed” from the king is that the king’s ultimate, terminal ownership is based on military force. Simply put, the king has the military power to just lay claim to the territory, and if you disagree with the legitimacy of that claim, you better bring an army because if you want to throw down against the king then shit’s going to get real.

Government and religious leaders at the time may have asserted a “divine right of kings” as to why the king is entitled to ultimate ownership of everything, but this is ultimately fairly hollow because of the possibility that another king will invade. This happened many times, where another army would attack and just seize ownership from the current king, and then also claim ultimate ownership under a ‘divine right’ of kings. The property ownership is derived from actual control and that actual control is gained from seizing it by military force.

The reason why this system “works” is because although the king is capable of asserting ownership as a result of having the army, that property doesn’t really do anything for the king unless other people work the land, administer over its people, and so on. This means that in order to get any actual, real-world use out of the land, the king has no option except to give other people rights over it.

Concisely summarized, “possession is nine tenths of the law” meaning that in the medieval conception of property, actual control (or potential to seize control by force if desired) is the main philosophical underpinning of property.

It is a very interesting aside that this approach to property prompted some commentators and thinkers to remark that “property is theft” but that’s an unrelated topic.

 

Traditional Property

Today, we have a somewhat different approach to what property means, but it is still fundamentally similar to the medieval system, particularly for land. Individual property rights are given very strong deference, but the foundation is still similar to the medieval king’s authority. A nation-state usually will either reserve or even exercise the right to take property, especially land. In the United States this is called “eminent domain” and is qualified with a requirement to pay the current owner fair market value, but it is quite literally the government making you an offer you can’t refuse.

The main philosophical difference in the more modern approach to property is giving individuals a stronger interest in their own property which approaches an ultimate ownership, but still not quite the sort of ultimate “divine right” that kings of yore enjoyed.

Greater respect and more safeguards and protections, both legal and cultural, are clearly progress on top of the more or less naked ‘might makes right’ of the Dark Ages. But if you really think about what it means to have a legislative, regulatory, and legal system that acts as the overseer and protector of individual property, what is really happening is that the reigning power is simply delegating greater authority and rights, and protecting those conferred individual rights to a much greater extent.

In the United States, the radical idea that founded the new form of government which was unprecedented at the time was of individual sovereignty, where each person would be sovereign, like a king, over themselves only. Although a compelling concept, it seems virtually impossible to actually implement, since any attempt to have the government protect that sovereignty seems philosophically opposed, since a true sovereign does not require (and indeed cannot avail itself) of the conditional protection by supplication to another sovereign.

Allow me to restate that in a different way. A serf is beneath a lord, who is beneath a king, and as a result each has certain property and certain rights which are mostly determined by their superiors, and are also protected by those superiors against attack by others. The king might assert that a lord owns a certain estate, and if another lord were to try to take that estate, the king would step in to protect the lord under attack because that is a violation of the established orders of the king. Likewise, the lord issues a certain fief to a serf to farm, and if someone tries to attack that farm, the lord steps in to defend it. The fact that the subordinate is dependent on the conditional grant by discretion, and also dependent on the protection of their superior in order to maintain their property and their individual “rights” within the system means they are not a sovereign. However, the monarch is sovereign because there is no superior above them; instead they must seize power by military force and there is no superior to stop them from doing so.

Even modern property is fundamentally derived from the same philosophical basis as medieval property. A nation-state, despite their democratic self-governance, sophisticated legal system, and many other advancements, is still ultimately the sovereign which acts to secure the rights of its subordinates, ultimately based on military force.

 

Crypto Property

Blockchains, despite their first implementation in Bitcoin as a humble ledger, have the potential to form the foundation for a completely new philosophical approach to property.

The existing property framework, a set of philosophical principles that has existed for hundreds of years, is ultimately derived from centralized authority. The simple reason for this is that there was never an alternative. A centralized authority was necessary to accurately track who owns what, and to enforce against things like theft.

Enter the blockchain. First, and most trivially, the blockchain enables the creation of an infallible record. For example, suppose we make a system so that when property is initially created a new entry is added stating that the property exists and recording its initial creator. When that property is transferred, add an entry that states the transferor, transferee, and exact time. Because this record is totally public (even searchable), there can be no confusion about the current correct owner. If someone steals a piece of property, they may have actual possession, but the blockchain will infallibly recall who its proper owner is.

For example, in the sale of land, for mortgages, and for countless other kinds of purposes, the act of “recording” is extremely important to create a record of who actually owns the property. The blockchain could contain records for every significant event in the history of every piece of property, making it virtually impossible to falsify, deceive, or otherwise engage in shenanigans.

Blockchains solve the problem of recording property infinitely better, more accurately, and more efficiently than having many offices and submitting paperwork. Not only that, but it creates this record so quickly and so cheaply, that it potentially makes sense to do it for everything, and not just for large transactions like real estate due to the slow speed and significant expense of running offices and using paperwork to do this job. In fact, it makes perfect sense to run this on the blockchain fully automated, such as having a factory churning out blockchain entries with each item manufactured, and having store inventory and checkouts transferring blockchain assets as well as the goods themselves. This can be done entirely by machines by sending messages automatically on certain events, such as when an item is scanned in a warehouse or when it is scanned at checkout from a store.

 

Crypto Assets

A perfect record is a game changer by itself. But it’s only the tip of the iceberg. More importantly, the blockchain could be used to create a new framework of actual property not merely create a perfect record of traditional property.

Bitcoin, for example, is a public, decentralized ledger of transactions. But because of how robust that record is, it’s actually possible to conceptualize “a Bitcoin” as a  real asset which changes hands, representing a positive change in one wallet and a negative change in another wallet when that transfer occurs. This is an entirely new kind of property.

Moreover, let’s broaden the meaning of crypto assets to include more than just money-like assets like Bitcoin. Suppose we create a crypto-asset that represents a permission instead of a measurement of value. Possession of the crypto asset enables the execution of the corresponding permissions.

Traditional property rights are often described as a “bundle of sticks” representing the various rights that a person has in a particular article of property. For example, the owner typically possesses the right to use the property, the right to transfer ownership, the right to destroy the property, and so on. If I own a car, I have the right to drive the car, the right to sell the car, even the right to take a crowbar and break my own car’s windows if I were so inclined. Other people do not have these rights because the car is my property.

Suppose we represent those rights as permissions using a crypto asset. More accurately, we have a “bundle” of crypto assets beneath a family corresponding to a particular piece of property, in this case a car. Crypto assets can be created to be transferable. Using code called “smart contracts” they can even be created to have complex relationships like being transferable conditionally or for a limited period of time. The sky is the limit with custom software which can control complex interactions, taking advantage of the excellent security of the blockchain to ensure they do what they are supposed to do.

Furthermore, it would be fairly straightforward to tie real-world actions to blockchain property permissions. Suppose instead of a mechanical key, you have a USB key which refers to a package of crypto-assets on the blockchain. You insert this crypto-key into a door or just wave it in front of a scanner, and the door checks whether you have permission to open that door. Then the door either opens or stays shut depending on whether you have the right permissions. Imagine the door to your house had this permissions-based lock, allowing you to permit people to open the door, and to revoke that permission at any time.

Blockchain property permissions also formalizes the sharing of property. Perhaps someone has permissions to open the door of my car, but not permission to drive my car. Or perhaps someone has permissions to open the door and to drive my car, but not to sell the car. Now imagine that the company with which I insure my car has a package of smart contracts which, for example, forbids me from issuing shareable permissions to drive the car.

You can imagine how blockchain property rights have a huge effect on the fundamental nature of what it means to “own” property.

 

Encryption-Based Private Property

Returning back to the foundation underlying property generally, what I am calling crypto property has a very different basis than traditional property.

Specifically, your actual ownership of a piece of property, or to some or all of the rights associated with property, will not depend at all upon the protections of a centralized record, or a centralized enforcing authority. Actual property ownership will not depend on others respecting your property, or on a government’s protection and enforcement of your property rights.

Instead, your property would be protected by encryption. You will need a secret, private key in order to uniquely identify that you are the owner of the associated property on the blockchain. As long as you protect the key, it becomes extremely difficult for anyone to mess with your property. Even if they steal the property itself, without the key they may be unable to do anything with it (with exceptions; i.e. food). Moreover, everyone else in the world has been previously alerted using an infallible record that you are the true owner of that property. And hopefully the fact that the property will be both useless and obviously stolen will dissuade would-be thieves from bothering.

However, relying on encryption has some disadvantages as well. It means that if someone steals your private key, they are effectively stealing your property. This is likely to be an improvement on top of someone physically stealing the property, but it does not mean that “true theft” is impossible. In order to truly steal property, it would be necessary to steal the private key and then use it to transfer ownership to yourself.

Also, using private keys does open up the possibility that lots of keys might be stolen together, such as on a USB key or a hard disk. Data security today is a serious concern even when it is user information and user privacy that are at stake. In a future world where keeping private keys secret is necessary in order to stop actual property from being stolen, keeping information secure takes on a much more serious tone.

The biggest danger here is that relatively tech-illiterate people might be scammed into giving up their private keys, and essentially give others their crypto property without knowing that is what they are doing. Physically handing someone a piece of property which they run off with requires no explanation. But the concept of private keys being used to control property will require a lot of education and explanation before it will be safe for the general public to contemplate widespread reliance on the technology.

The potential of crypto property is enormous. But until the general public is comfortable with digital property, and perhaps even with the concept of a crypto-asset and how encryption works, it would be a good idea to be very cautious and circumspect in pushing for widespread adoption.

 

Conclusion

Crypto property has the potential to be a completely new way of thinking about property, replacing centuries of traditional property thinking.

The central point to remember about crypto property is the foundation of that property is based on having a secret piece of information which gives you ownership, and not based on a centralized authority either issuing or protecting your rights.

This isn’t to say that enforcement is unnecessary, but it does change the meaning of enforcement. When someone steals someone else’s phone, other people will need to check that the phone’s real owner is different from the person with actual possession of the device, and unless that person has some explanation (such as permission to possess) other people or the police should step in to correct that situation. This is likely to be much, much easier for police, federal agents, and everyone else involved, than the current situation, due to the amount and reliability of the information made available to them on the blockchain.

In this way the blockchain massively empowers the effective enforcement of property, while at the same time de-clawing the state of its mandate to create the property regime. Disputes about property ownership become much easier to resolve, and the state is now able to rely on a highly secure decentralized record rather than by directly asserting the meaning of property by fiat.

And, for the first time, true individual sovereignty using encryption may actually be achievable. Instead of relying on a centralized authority to issue, protect, or enforce property rights, an individual’s own sovereign control of their private keys acts as the ultimate foundation and source of their property rights.